Companies that develop and manufacture medical devices, therapeutics and pharmaceuticals are exposed to risk at each phase of development. An unexpected event can prevent the next big advancement from ever going to market. Life science executives must navigate contractual, legal and operational risk as they evolve. Here is a list of insurance coverage that is recommend at each stage of development.
Coverage During Discovery/Preclinical Stages
Lab space, employees and property, like lab equipment and supplies, often require contracts with insurance requirements that will need to be met.
Commercial General Liability Insurance (Premise Liability) provides general protection of businesses against liability claims for bodily injury and property damage coming from the building, operations, and products. It protects the owners from any property damage or bodily injuries people may file against the company.
Auto Liability Insurance protects against bodily injury and property damage resulting from auto accidents of non-owned or rental vehicles. This coverage protects companies when an employee’s vehicle or rental car is involved in an accident while on company business.
Workers’ Compensation helps with medical claims for work-related employee injuries. Worker’s compensation is a type of insurance that compensates injured or disabled workers. Employees that accept workers’ compensation benefits, can no longer sue their employers.
Employers Liability Insurance protects employers against claims made by employees who suffer a job-related illness or injury not covered by workers’ compensation insurance.
Employment Practice Liability protects the employer from claims of employee discrimination, harassment, etc. during the employment process and as a result of policies.
Property Insurance protects research and development property. There are several types of property insurance policies, such as liability coverage and property protection. This includes the temperature sensitive, research animals (cost to recreate research performed) and specialty equipment. Umbrella/Excess Liability adds a layer of limits to primary policies.
Coverage During the First Clinical Stage
Outside investment is introduced to move into human clinical testing, and small-scale batch transition to larger scale clinical batches.
Private Directors & Officers Liability protects executives from suits brought by shareholders, vendors, governmental agencies and competitors.
Product Liability Insurance covers bodily injury to human subjects in a clinical trial.
Cyber Liability Insurance helps with data breach notification costs and financial loss to impacted parties.
Property Insurance covers the product lot from manufacturing to the clinic.
Commercial Crime Insurance protects outside investments from employee theft and computer crime.
Coverage During the Second and Third Clinical Stage
Additional outside investment, including capital markets (IPOs/Reverse Mergers/SPACs) and more complex clinical trials require added coverage.
Directors and Officers Liability protects executives from securities-related claims.
Product Liability with a U.S. Master Insurance policy covers U.S. exposures and provides excess global coverage through local admitted insurance policies by jurisdiction across the world.
Coverage During Commercialization Stage
When going into commercialization, typically a salesforce is hired, a fleet of vehicles may be added and transfer to manufacturing is completed.
Product Recall Insurance covers a withdrawn product from the market.
Environmental Liability protects against chemical/pollution spills.
Business Travel Insurance covers accident/injury to employees traveling domestically and abroad.
Coverage During Mergers and Acquisitions
The buyer will have insurance requirements of the target company to guard against past liabilities when the company was operational.
Product Liability Extended Reporting Period (TAIL coverage) helps with liability suits that arise post transaction for product sold/injury sustained before the transaction.
Directors and Officers Liability Extended Reporting Period (TAIL coverage) helps with suits related to activity of the executives prior to and leading up to the acquisition.
Representation & Warranties Insurance covers the buyer when making claims that representations and warranties were breached in the purchase agreement.
Each phase of development involves different risk exposures from the prior phase. As the company moves closer to exit, risk intensifies and becomes more complex. Having the proper insurance in place to meet the exposures in each phase of development is critical.
For more information, visit https://www.higginbotham.net/life-science or contact BioMedSA members:
Bryant Rutledge | Life Science Business Associate | Higginbotham
P 210-971-5058 | C 469-556-0706 | brutledge@higginbotham.net
Sources: https://generalliabilityinsure.com/cgl-policy-coverage.html
